Keep distorting events (large losses, catastrophes, pandemic effects) from skewing the data a rate indication relies on.
Free CAS Exam 5 (Basic Ratemaking and Reserving) lesson in Ratemaking. 20 min read, ~3,050 words.
Large losses, catastrophes, and pandemic effects are real but volatile; left raw, one year's shock distorts the whole indication. Cap individual losses at a large-loss threshold chosen by balancing loss volume against volatility, pool the excess across years, and reload it as a smooth loading. Trend losses to future levels...
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What this lesson covers
- Content
- Example 1
- Example 2
- Example 3
- Example 4
- Common Mistakes
- Check Your Understanding
- Exam Shortcuts
Learning objectives
- A10
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